January 25, 2013

Dynastic wealth can hurt children, but can philanthropy help?

Categories: Philanthropy Updates

Writing in the latest issue of Philanthropy magazine, Kay S. Hymowitz discusses the perils — and opportunities — of children raised in wealthy families. The key issue: how to navigate the moral and emotional hazards of growing up wealthy, and how to produce children who will wisely manage wealth and use it for good.

One way to avoid the pitfalls of dynastic wealth, Hymowitz writes, is by ensuring that children still face the normal rigors and disappointments of life:

People who have given a lot of thought to the problems of growing up rich—therapists, wealth advisors, parents, and adult children themselves—generally cite two antidotes to the moral and emotional hazards of a wealthy childhood: work and philanthropy. “Churchill wrote that the reason the great families of England had survived for so long was their belief in work and service,” Keith Whitaker says. “It was a shared norm, an expectation among the wealthy.” At one time, the norm was common in the United States. The State Department, Whitaker explains, “was a very genteel place.” The same was true in the early days of the CIA.

Warren Buffett’s oft-recited dictum that he would leave his children enough money “that they feel they can do anything, but not so much they can do nothing” reflects a more contemporary understanding of work as not just necessary for paying the rent but as a potential source of personal satisfaction. Educated young people expect to “find their passion,” as it is often put, and to exercise their talents in a meaningful career. Trust fund kids can be raised to want that too, but that’s not all they have to gain from having a regular job. Work helps to normalize their otherwise exotic existence.

Like the welfare-dependent poor, work exposes them to regular folks and habits. And because difficult bosses, obnoxious co-workers, and unexpected assignments are a fact of work life, they learn to tolerate frustrations otherwise missing from their charmed lives. Jason Franklin, the 33-year-old grandson of a real estate magnate who went on to lead Bolder Giving, a philanthropy advocacy organization, identifies a disconnect between the power of an important family name and entry-level work. “When you have enough financial resources when you’re young, you think you can skip lower-level jobs,” he says. “You can’t. You need to slog through those jobs to get to the interesting, higher-level work.”